Key developments and outlook in Luxembourg Employment Law (2025–2026)

Luxembourg’s employment law is constantly evolving in response to both national initiatives and European Union legislation. 

The reforms introduced in 2025 have created a more flexible, transparent, and protective legal framework, paving the way for further changes in 2026. 

The following overview highlights the most notable changes and upcoming trends for 2026.

Key developments in 2025

• Minimum wage increase and salary indexation: effective 1 January 2025, the minimum social wage was increased. Additionally, a wage indexation of 2.5% was implemented as of 1 May 2025, raising the index rate to 968.04 points (up from 944.43 points).
• Transposition of the EU Mobility Directive: by Law of 25 March 2025, Luxembourg transposed the EU Directive 2019/2121 (the “EU Mobility Directive”) into national law. This directive establishes a harmonised legal framework for cross-border conversions, mergers, and divisions, enhancing company mobility within the EU and strengthening protections for stakeholders, employees, and creditors.
• Predictive employment and skills management programme: the Law of 19 June 2025 introduced a predictive employment and skills management framework into the Labour Code. This initiative supports companies and employees facing major structural changes (such as technological, environmental, regulatory, or societal shifts) through requalification and upskilling. The law defines eligibility criteria, the approval process, the role of accredited consultants, and provides financial support for training.
• Pay Transparency Directive: Luxembourg is preparing to implement Directive (EU) 2023/970 (the “EU Pay Transparency Directive”), with a draft bill expected by the end of 2025. The forthcoming law aims to reinforce the principle of work of equal value between men and women, introducing pay transparency and enforcement mechanisms for employers.

Outlook for 2026

• New salary indexation anticipated: an additional salary indexation is expected, which will adjust wages in line with inflation and cost-of-living increases.
• Pension regime reform: Bill 8634, submitted to Luxembourg’s Chamber of Deputies in October 2025, introduces key reforms aimed at ensuring the long-term sustainability of the pension system. The proposed measures include maintaining the retirement age at 65, gradually increasing the required insurance periods by 8 months by 2030, raising the overall contribution rate to 25.5% from 2026 to 2032, introducing a progressive pension scheme, and making the recognition up to 9 years of non-remunerated study and vocational training periods count towards pension insurance. A progressive pension option will allow part-time work during early retirement, subject to employer agreement. The Bill is designed to address rising pension costs and encourage later retirement, marking the beginning of the legislative process during which these proposals may still evolve.
• Right to disconnect sanctions: the Law of 28 June 2023 introduced the right to disconnect into the Labour Code, requiring employers to adopt suitable measures so that employees are not expected to engage in work-related communications outside of working hours. Although the law entered into force in June 2023, sanctions for non-compliance will apply as of 4 July 2026.
• Implementation of EU Directives: Luxembourg must transpose several key EU directives by 2026, including:
  • EU Directive 2024/1233 on work and residence permits for third-country nationals, by 21 May 2026, establishing a simplified single permit procedure covering both residence and employment rights.
  • EU Directive 2023/970 on pay transparency, by 7 June 2026.
  • EU Directive 2024/2831 on improving working conditions in platform work by 2 December 2026.

In conclusion, the recent and forthcoming changes in Luxembourg’s employment law, ranging from pension reform and pay transparency to the right to disconnect and salary indexation, mark a significant shift in the legal landscape. 

These measures will require both employers and employees to adapt to new compliance obligations and workplace standards, signalling a period of adjustment as the country moves to address evolving labour market needs in line with European requirements.